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1.Never engage in market manipulation of security prices.2. Deal
fairly with all clients when disseminating information, making •
recommendations, and placing trades as to not favor or disadvantage one
client over another.3.Thoroughly investigate and research different
investment options to have a • reasonable basis for a
recommendation4.When using complex derivative products, the manager
should conduct stress testing to determine how the investment will react
under different scenarios.5.Managers must be ab
records are the property of the firm. If no other regulatory standards
are in place, CFA Institute recommends at least a 7-year holding
period.A member who changes firms must recreate the analysis
documentation supporting her recommendation using publicly available
information or information obtained from
Understand that an adequate compliance system must meet industry
standards, regulatory requirements, and the requirements of the Code and
Standards.bring an inadequate compliance system to the attention of
firm's management and recommend corrective action.limit the suspected
employee's activitiesfaced with no compliance procedures or with
procedures he believes are inadequate must decline supervisory
responsibility in writing until adequate procedures are adopted by the
firm.
Ensuring compliance with the Code and legal and regulatory
requirements and • appointing a compliance officer.Ensuring that
portfolio information disseminated to clients is accurate and complete •
and reviewed by an independent third party.Appropriately maintaining
records.• (6 years for the firm, 7 years for the individual)Employing
qualified staff along with adequate resources.•Instituting a contingency
plan in the event of a natural disaster
Limited participation in equity IPOsRestrictions on private
placements.Establish blackout/restricted periods.Reporting requirements.
Supervisors should establish reporting procedures, including duplicate
trade confirmations, disclosure of personal holdings/beneficial
ownership positions, and preclearance procedures.Disclosure of policies.
When requested, members must fully disclose to investors • their firm's
personal trading policies.
When Members and Candidates are in an advisory relationship with a
client, they 1. must:a. Make a reasonable inquiry into a client's or
prospective clients' investment experience, risk and return objectives,
and financial constraints prior to making any investment recommendation
or taking investment action and must reassess and update this
information regularly.b. Determine that an investment is suitable to the
client's financial situation and consistent with the client's written
objectives, mandates, and c
Members should encourage their firms to:Develop and/or adopt a code of
ethics.•Make available to employees information that highlights
applicable laws and • regulations.Establish written procedures for
reporting suspected violation of laws, regulations, or • company
policies.
Members and Candidates must:1.Exercise diligence, independence, and
thoroughness in analyzing investments, making investment
recommendations, and taking investment actions.2.Have a reasonable and
adequate basis, supported by appropriate research and investigation, for
any investment analysis, recommendation, or action.
Members should consider scenarios outside those typically used to
assess downside risk and the time horizon of the data used for model
evaluation to ensure that both positive and negative cycle results have
been considered
In matters related to their employment, Members and Candidates must
act for the benefit of their employer and not deprive their employer of
the advantage of their skills and abilities, divulge confidential
information, or otherwise cause harm to their employer.
Members and Candidates must not engage in practices that distort
prices or artificially inflate trading volume with the intent to mislead
market participants
Remember that this type of research is fraught with potential
conflicts. Analysts' compensation for preparing such research should be
limited, and the preference is for a flat fee, without regard to
conclusions or the report's recommendations.
Misrepresentations include guaranteeing investment performance and plagiarism.
1. Is the course of action consistent with the intent of the Code and
Standards?2. Would the client agree that this action is the best
alternative? Or would the client consider the action questionable?3.
Once the circumstances of the situation are disclosed, will the firm's
reputation for fair dealing be enhanced or compromised? How would it
look in the press?4. Is the decision admirable and consistent with what
would be expected from a leader?
Have a policy requiring that research reports and recommendations have
a basis that • can be substantiated as reasonable and adequate.Have
detailed, written guidance for proper research and due diligence.Have
measurable criteria for judging the quality of research, and base
analyst • compensation on such criteria, a minimum acceptable level of
scenario • testing for computer-based models and include standards for
the range of scenarios, model accuracy over time, and a measure of the
sensitivity of cash flow
Investment transactions for clients and employers must have priority
over investment transactions in which a Member or Candidate is the
beneficial owner.
Protect the integrity of opinions—make sure they are unbiased.•Create a
restricted list and distribute only factual information about companies
on • the list.Restrict special cost arrangements—pay for one's own
commercial transportation • and hotel; limit use of corporate aircraft
to cases in which commercial transportation is not available.Limit
gifts—token items only. Customary, business-related entertainment is
okay • as long as its purpose is not to influence a member's
professional independence or obje
Written complaints about a member or candidate's professional conduct that are 2. received by the Professional Conduct staff.
may request (in writing) an explanation from the subject member or
candidatemay (1) interview the subject member or candidate,(2) interview
the complainant or other third parties, and/or(3) collect documents and
records relevant to the investigation.
Members and Candidates must keep information about current, former,
and prospective clients confidential unless:The information concerns
illegal activities on the part of the client or prospective 1.
client,Disclosure is required by law, or2.The client or prospective
client permits disclosure of the information
Members and Candidates must not engage in any professional conduct
involving dishonesty, fraud, or deceit or commit any act that reflects
adversely on their professional reputation, integrity, or competence.
Members should make sure their firms have procedures in place to
review any external advisers they use or promote to ensure that, among
other things, the advisers:Have adequate compliance and internal
controls.•Present returns information that is correct.•Do not deviate
from their stated strategies
Members and Candidates must make reasonable efforts to detect and
prevent violations of applicable laws, rules, regulations, and the Code
and Standards by anyone subject to their supervision or authority.
Members must avoid misstating performance or misleading
clients/prospects about investment performance of themselves or their
firms, should not misrepresent past performance or reasonably expected
performance, and should not state or imply the ability to achieve a rate
of return similar to that achieved in the past. For brief
presentations, members must make detailed information available on
request and indicate that the presentation has offered limited
information.
1. salary arrangements so manager is not taking undue risks in
conflict with clients interests2.create procedure for managing
confidential client information (collection, utilization, and storage).
Sharing with authorities is ok in case of the investigation.3.
anti-money-laundering policy4.Define token gift. Cash should not be ever
accepted. Always notify manager in writing when accepting any gift.
encourage their firms to adopt a policy for periodic review of the
quality of third-party researchReview assumptions used.•Determine how
rigorous the analysis was.•Identify how timely how the research
is.•Evaluate objectivity and independence of the re
Limit the number of people who are aware that a change in
recommendation will be • made.Shorten the time frame between decision
and dissemination.•Publish personnel guidelines for
pre-dissemination—have in place guidelines • prohibiting personnel who
have prior knowledge of a recommendation from discussing it or taking
action on the pending recommendation.Simultaneous dissemination of new
or changed recommendations to all candidates • who have expressed an
interest or for whom an investment is suitable.Main
Client transactions take priority over personal transactions and over
transactions made on behalf of the member's firm. Personal transactions
include situations where the member is a "beneficial owner." Personal
transactions may be undertaken only after clients and the member's
employer have had an adequate opportunity to act on a recommendation.
Note that family member accounts that are client accounts should be
treated just like any client account; they should not be disadvantaged.
Knowledge of the Law. Members and Candidates must understand and
comply with all applicable laws, rules, and regulations (including the
CFA Institute Code of Ethics and Standards of Professional Conduct) of
any government, regulatory organization, licensing agency, or
professional association governing their professional activities. In the
event of conflict, Members and Candidates must comply with the more
strict law, rule, or regulation. Members and Candidates must not
knowingly participate or assist in an
things to consider prior to recommendation: A firm's financial
results, operating history, and business cycle stage.•Fees and
historical results for a mutual fund.•Limitations of any quantitative
models used.•A determination of whether peer group comparisons for
valuation are appropriate.•
Proper communication with clients is critical to provide quality
financial servicesMembers must illustrate to clients and prospects the
investment decision-making process utilized.All means of communication
are included here, not just research reportsmembers should communicate
the potential gains and losses on the investment clearly in terms of
total returns.
A report by a CFA exam proctor of a possible violation during the examination
(1) that no disciplinary sanctions are appropriate, (2) to issue a
cautionary letter, or (3) to discipline the member or candidate.
When referring to CFA Institute, CFA Institute membership, the CFA
designation, or candidacy in the CFA Program, Members and Candidates
must not misrepresent or exaggerate the meaning or implications of
membership in CFA Institute, holding the CFA designation, or candidacy
in the CFA Program.
Do not trade or cause others to trade on material nonpublic
information (insider information); always place client trades before
your own,using commissions generated (soft dollars) only to provide
products and services that aid the portfolio manager in the investment
decision-making process (i.e., ultimately benefit the client); seek best
execution for all trades; and allocate shares equitably among clients.
Members must inform employers, clients, and prospects of any benefit
received for referrals of customers and clients, allowing them to
evaluate the full cost of the service as well as any potential
impartiality. All types of consideration must be disclosed.
Members and Candidates must use reasonable care and judgment to
achieve and maintain independence and objectivity in their professional
activities. Members and Candidates must not offer, solicit, or accept
any gift, benefit, compensation, or consideration that reasonably could
be expected to compromise their own or another's independence and
objectivity.
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